Glossary

ABS: Asset-backed security. 

ARM: Adjustable-rate mortgage.

CapEx: Capital expenditure.

CLO: Collateralized loan obligation.

CMBS: Commercial mortgage-backed security.

CRT: Credit risk transfer.

FOMC: Federal Open Market Committee.

HPA: Homeowners Protection Act.

IG: Investment grade.

QM: Qualified mortgage.

M&A: Mergers & acquisitions.

MBS: Mortgage-backed security.

MOE: Merger of equals.

NA RMBS: Non-agency residential mortgage-backed security.

NPL: Non-performing loan.

OPEC: Organization of Petroleum Exporting Countries.

P&L: Profit & loss.

RMBS: Residential mortgage-backed security.

RPL: Reperforming loan.

S&L: Savings & loan.

SFR: Single-family rental.

5-Year Treasury Index: A one-security index comprising the most recently issued 5-year U.S. Treasury note or bond.

10-Year Treasury Index: A one-security index comprising the most recently issued 10-year U.S. Treasury note or bond.

30-Year Treasury Index: A one-security index comprising the most recently issued 30-year U.S. Treasury note or bond.

Alpha: Measures the difference between a fund’s actual returns and its expected performance, given its level of risk (as measured by beta). A positive alpha figure indicates the fund has performed better than its beta would predict. In contrast, a negative alpha indicates a fund has underperformed, given the expectations established by the fund’s beta.

Basis Point (bps): One hundredth of one percent and is used to denote the percentage change in a financial instrument.

Beta: A measure of an investment’s risk of volatility compared to the overall market.

Bloomberg Barclays Global Aggregate Index: A flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.

Bloomberg Barclays U.S. Aggregate Bond Index: An unmanaged index that measures the performance of the investment-grade universe of bonds issued in the United States. The index includes institutionally traded U.S. Treasury, government sponsored, mortgage and corporate securities.

Bloomberg Barclays U.S. Corporate High Yield Bond Index: An unmanaged market value-weighted index that covers the universe of fixed rate, non-investment grade debt.

Bloomberg Barclays U.S. Investment Grade Corporate Index: An index that covers the publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. To qualify, bonds must be SEC-registered.

Cash Flow: Periodic coupons received by the bondholder during their holding period.

CBOE SPX Volatility Index (VIX): A key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.

Comparison between Regional Finances and the IG Corporate Bond Market: The regional financials, or corporate bonds issued by regional and community banks, are unsecured corporate bonds issued at either the holding company or bank level. The bonds are backed by the full faith and credit of the company/issuer and the failure of the issuer to make a single interest or principal payment would be a default of the issuer (in this case the issuer is the regional or community bank). Most of the regional and community corporate bonds are investment grade rated by Kroll Ratings Agency and the issuance sizes tend to be smaller than typical IG corporate bonds. IG corporate bonds are unsecured bonds issued by investment grade companies.

Consumer Price Index (CPI): An index that measures the changes in the price of a certain collection of goods and services bought by consumers in an effort to measure inflation.

Core PCE Price Index: An index that is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE price index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.

Correlation: A statistical measure of how two securities move in relation to another.

Credit Spread: The difference in yield between two bonds of similar maturity but different credit quality.

Debt/EBITDA Ratio: Measures the amount of income generated and available to cover debt before covering interest, taxes, depreciation and amortization expenses.

Debt-to-GDP Ratio: The ratio of a country’s debt to its gross domestic product (GDP).

Debt-Service Coverage Ratio: The relationship of a property’s annual net operating income to its annual mortgage debt service (principal and interest payments).

Distribution Yield: The distribution yield is calculated by annualizing actual dividends distributed for the monthly period ended on the date shown and dividing by the net asset value on the last business day for the same period. The yield does not include long-or short-term capital gains distributions.

Dow Jones Industrial Average (DJIA): An index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the NASDAQ.

Duration: Measures a portfolio’s sensitivity to changes in interest rates. Generally, the longer the duration, the greater the price change relative to interest rate movements.

Effective Duration: Measures a portfolio’s sensitivity to changes in interest rates. Generally, the longer the effective duration, the greater the price change relative to interest rate movements.

Forward Price/Earnings Ratio: A ratio that divides the current share price by the estimated future per share.

Free Cash Flow (FCF): A measure of a company’s financial performance, calculated as operating cash flow minus capital expenditures. FCF represents the cash that a company is able to generate after spending the money required to maintain or expand its asset base.

Household Debt-to-GDP: The ratio of debt incurred by resident households of the U.S. economy as a percentage of economic output.

ICE BofAML U.S. High Yield Homebuilders & Real Estate Index: A subset of ICE BofAML U.S. High Yield Index including all securities of Real Estate Development & Management, REITs, Building & Construction and Housing Association issuers.

ISM Manufacturing Index: An index that is based on surveys of more than 300 manufacturing firms by the Institute for Supply Management (ISM).

J.P. Morgan BB CLO Index: An index based on BB bonds drawn from broadly syndicated U.S. CLO transactions, with selection criteria including the omission of revolvers.

LIBOR: A benchmark rate that some of the world’s leading banks charge each other for short-term loans. It stands for Intercontinental Exchange London Interbank Offered Rate and serves as the first step to calculating interest rates on various loans throughout the world.

NASDAQ Composite: A market capitalization-weighted index of the common stocks and similar securities listed on the NASDAQ stock exchange.

Pending Home Sales Index (PHS): A leading indicator of housing activity that measures housing contract activity, and is based on signed real estate contracts for existing single-family homes, condos, and co-ops.

Price/Earnings Ratio: The ratio of a company’s stock price to the company’s earnings per share.

Price-to-Book Ratio: A financial ratio used to compare a company’s current market price to its book value.

Purchasing Managers’ Index (PMI): An indicator of the economic health of the manufacturing and service sectors.

S&P CoreLogic Case-Shiller 20-City Composite Home Price Index: The Index seeks to measure the value of residential real estate in 20 major U.S. metropolitan areas.

S&P 500 Total Return Index: An American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ.

Spread: The difference in yield between a U.S. Treasury bond and a debt security with the same maturity but of lesser quality.

Tranche: A portion of debt or structured financing. Each portion, or tranche, is one of several related securities offered at the same time but with different risks, rewards, and maturities.